China will never be the world's main reserve currency. Why?

 

China will never be the world's main reserve currency. Why? The reason is technical. Bangladesh has a trade deficit with China. In 2018, Bangladesh imported about 18 billion dollars from China but exported 1 billion dollars. That is, Bangladesh and China have a deficit of seventeen billion dollars. Now China can say whether it wants to or not, Bangladesh will have to buy Chinese RMB, what will happen as a result? The demand for China RMB will increase and hence the price of China RMB will increase. China sit negative with almost all countries in the world. Now if the Chinese RMB becomes the reserve currency of the central banks, the value of the Chinese currency will increase. As a result, the value of China's RMB will go to a point where China's goods will become expensive. China will lose competition from export-oriented industries, the mainstay of its economy. This discussion of the trade chat that other countries' goods will become cheaper than China's applies to reserves. China will never want its currency to be a reserve currency. China itself could have enforced one if it wanted. did not Because of the trade deficit, this additional part should be paid in dollars by its trading partners. And if the price of the dollar rises, they will profit from it. Because most of China's reserves are saved in dollars. And China has a soft peg with its dollar. That is, the price of China's currency is not determined by market forces. China's central bank controls an artificial price of China's RMB by controlling supply, just like Bangladesh's central bank. The real value of which has been artificially kept low so that there is Chinese export competition. A Chinese currency is never the world's reserve currency. The rest is secondary to geopolitics or whatever the reason is. If we understand this then it is easy to understand another technical thing why the dollar is the reserve currency in the world. Because the United States maintains a very unique privilege that no other country in the world does. The US trade deficit is too high. But steel has a high demand for dollars because of the strength of the US domestic market. Let me explain. Just as China has massive trade suppliers, the US has a massive trade deficit. If there is a trade deficit, the dollar price should fall. But the value of the dollar does not fall despite the trade deficit because the US dollar is used as the main reserve currency by the world's central banks and because of the high demand for US Federal Reserve notes worldwide, the high demand maintains a deficit currency value. This is a unique privilege that no other country in the world arranges. This means that a country seeking a world reserve currency must always run a trade deficit, while at the same time, its central bank must be trusted by the rest of the world's central banks and must have strong institutions because if the country runs a trade surplus, the currency will appreciate and exports will increase. Competitiveness will decrease. But China fulfills neither of these two conditions. Because China's trade deficit with most countries is positive and its internal institutions are weak, investors do not trust China to do anything big. At the same time, China's currency is a bit of a soft peak. If you hold China's currency, you will continue to suffer because China continues to devalue its currency in various ways that the US does not have the incentive to do so. America wants the value of the dollar to rise so that they can buy goods at a lower price and the pressure of the deficit will be reduced. As a result, unless there is a dramatic change in the Chinese economy or China's export trade is heading toward destruction part, the MB will never be a defective reserve currency. World trade will have dollar dominance because China wants it to. It is a very critical issue. Many questions can be answered if you think deeply about this matter.